WeWork, the once high-flying office space-sharing giant, is set to make its first appearance in U.S. bankruptcy court as it embarks on a mission to restructure its finances and drastically reduce its debt burden. The company, backed by SoftBank, filed for bankruptcy protection in Newark, New Jersey, with a plan that could slash $3 billion in debt and downsize its extensive real estate portfolio. This turn of events comes after WeWork faced unsustainable rent costs and a significant drop in demand for office spaces following the onset of the COVID-19 pandemic.
WeWork’s bankruptcy filing is a significant move in its ongoing efforts to address its financial woes. Once valued at $47 billion, the company expanded rapidly, but its aggressive approach led to mounting losses, primarily driven by long-term lease obligations. As the pandemic reshaped the landscape of office space utilization, WeWork found itself struggling to meet its financial commitments.
Earlier attempts to restructure its debt had failed to avert bankruptcy. However, WeWork has now reached a restructuring agreement with over 90 percent of its bondholders, paving the way to convert $3 billion of debt into equity in the company, according to a report in Reuters. This proposed restructuring would allow SoftBank, the majority owner with a 70 percent stake, to retain an equity interest in WeWork.
Prior to filing for bankruptcy, WeWork managed to renegotiate a substantial number of leases, resulting in savings of approximately $12.7 billion in future rent payments. Nevertheless, the company recognizes the need to further control rent costs. As part of its bankruptcy strategy, WeWork has identified 69 leases it intends to terminate in the initial stages of the proceedings. Additionally, the company is looking to renegotiate lease terms with 400 landlords, signaling its commitment to achieving a more sustainable real estate footprint.
WeWork’s bankruptcy filing affords it significant leverage when it comes to its lease agreements. U.S. bankruptcy laws provide debtors with substantial flexibility to walk away from leases, which can be a challenge for landlords to navigate. Landlords often have limited control during the initial stages of bankruptcy.
On Wednesday, WeWork will appear before U.S. Bankruptcy Judge John Sherwood overseeing the Chapter 11 proceedings. The company will seek approval for various initial steps, including continuing to pay its 2,700 employees and essential vendors such as building maintenance and cleaning services, Reuters stated. According to court filings, WeWork entered bankruptcy with approximately $164 million in cash reserves, which will play a crucial role in funding its operations during the restructuring process.
Below are the WeWork leases across the West Coast that the company plans to reject as part of its bankruptcy proceedings:
Southern California
3000 S. Robertson Blvd., Los Angeles
1453 Third Street Promenade, Santa Monica
18191 Von Karman Ave., Irvine
8305 Sunset Blvd., Los Angeles
8687 Melrose Ave., Los Angeles
1240 Rosecrans Ave., Manhattan Beach
808 Wilshire Blvd., Santa Monica
San Francisco Bay Area
1455 Market St., San Francisco
180 Geary St., San Francisco
1814 Franklin St., Oakland
222 Kearny St., San Francisco
430 California St., San Francisco
800 Market St., San Francisco
25 Taylor St., San Francisco
Seattle
920 Fifth Ave., Seattle
